India and the Grand Duchy of Luxembourg have moved a step closer towards entering into a double taxation avoidance agreement (DTAA), with both sides now agreeing on the text of the proposed agreement.

The concurrence to the text came at a meeting between Luxembourg's Minister of Economy and Foreign Trade, Mr Jeannot Krecke, and the Union Finance Minister, Mr P. Chidambaram, here on Tuesday.

"The text has been agreed at the meeting and both sides have decided to put it on the fast track (for early signing and implementation)," Mr Paul Steinmeitz, Ambassador of Luxembourg to India told Business Line.

Indications are that both sides may take 6-12 months for completing the Government procedures before bringing the agreement into force.

Sources said that the proposed DTAA is not about financial services, but more about manufacturing and industry. It is expected to benefit the manufacturing and airline companies of Luxembourg having linkages with India.

India and Luxembourg have been discussing a DTAA for the last 10-15 years. Negotiations for the DTAA have been on for the last five years.

Sources said that both sides have now agreed that the EU legislation would apply on issues relating to banking secrecy and exchange of information in this regard. The contentious issue on taxation of interest earned by State-owned banks has also been sorted out.

Although annual bilateral trade is growing, it is rather miniscule at 40 million. The absence of DTAA has been cited as a reason for bilateral trade being below potential.